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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
SUBMICRON SYSTEMS CORPORATION
(Name of Issuer)
(AMENDMENT NO. 1)
SUBMICRON SYSTEMS CORPORATION
(Name of Person(s) Filing Statement)
9% CONVERTIBLE SUBORDINATED NOTES DUE DECEMBER 15, 1997
WARRANTS TO PURCHASE COMMON STOCK
(Title of Class of Securities)
NOT APPLICABLE
------------------------
(CUSIP Number of Class of Securities)
MR. DAVID F. LEVY
PRESIDENT
SUBMICRON SYSTEMS CORPORATION
6620 GRANT WAY
ALLENTOWN, PA 18106
(610) 391-9200
(Name, Address and Telephone Number of Person Authorized to Receive Notice and
Communications on Behalf of Person(s) Filing Statement)
COPY TO:
RICHARD J. BUSIS, ESQUIRE
COZEN AND O'CONNOR
1900 MARKET STREET
PHILADELPHIA, PA 19103
(215) 665-2000
JULY 8, 1996
(Date Tender Offer First Published, Sent or Given to Security Holders)
CALCULATION OF FILING FEE
<TABLE>
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TRANSACTION VALUATION* AMOUNT OF FILING FEE
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$21,161,250 $4,233**
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* For purpose of calculation of a filing fee only. The amount
of the filing fee equals 1/50 of 1% of the value of the securities to be
exchanged. There is no public market for the securities to be exchanged.
Accordingly, the transaction value is based upon the market value of the
Common Stock offered in exchange therefor, based on the closing price of the
Common Stock on the Nasdaq National Market as of July 3, 1996.
** Paid with initial filing on July 8, 1996.
/ /Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and
identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form or
schedule and the date of its filing.
<TABLE>
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Amount previously paid: N/A Filing party: N/A
Form or registration No.: N/A Date filed: N/A
</TABLE>
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<PAGE> 2
SubMicron Systems Corporation hereby amends and supplements its
Statement on Schedule 13E-4 filed with the Securities and Exchange Commission
on July 8, 1996. The Exchange Offer has been extended until 5:00 p.m., New
York City time, on August 26, 1996. All other terms and conditions contained
in the Exchange Offer remain unchanged. The Offering Circular dated July 8,
1996 (Exhibit (a)(1)), has been amended to reflect certain comments from the
Commission and is refiled herewith (without exhibits thereto). Exhibits (a)(6)
(Press Release dated August 5, 1996) and (a)(7) (Form of Letter to Holders of
Notes and Warrants), each reflecting the extension of the expiration date of
the Exchange Offer, are included herewith.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
(a)(1) Offering Circular dated July 8, 1996, as amended.
*(a)(2) Form of Letter of Transmittal dated July 8, 1996.
*(a)(3) Form of Notice of Guaranteed Delivery dated July 8, 1996.
*(a)(4) Form of Letter to Holders of Notes and Warrants from the President
of the Company.
*(a)(5) Press Release dated July 8, 1996.
(a)(6) Press Release dated August 5, 1996.
(a)(7) Form of Letter to Holders of Notes and Warrants dated August 5,
1996.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
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* Previously filed
2
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
SUBMICRON SYSTEMS CORPORATION
Dated: August 5, 1996
By: /s/ David F. Levy
------------------------------------
David F. Levy,
President
3
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EXHIBIT INDEX
<TABLE>
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SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- --------------------------------------------------------------------- ------------
<S> <C> <C>
(a)(1) Offering Circular dated July 8, 1996, as amended.....................
(a)(6) Press Release dated August 5, 1996...................................
(a)(7) Form of Letter to Holders and Warrants dated August 5, 1996..........
</TABLE>
<PAGE> 1
OFFERING CIRCULAR
SUBMICRON SYSTEMS CORPORATION
OFFER TO EXCHANGE
9% CONVERTIBLE SUBORDINATED NOTES DUE DECEMBER 15, 1997
AND WARRANTS TO PURCHASE SHARES OF COMMON STOCK
FOR SHARES OF THE COMPANY'S COMMON STOCK
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON AUGUST 5, 1996
(THE "EXPIRATION DATE"), UNLESS EXTENDED.
SubMicron Systems Corporation (the "Company") hereby offers, upon the terms
and subject to conditions set forth herein and in the accompanying Letter of
Transmittal (which together constitute the "Exchange Offer"), to exchange 135
shares of its Common Stock, $.0001 par value (the "Common Stock"), for each Unit
held by the recipient of this Exchange Offer, each Unit consisting of (i) $1,000
principal amount of the Company's 9% Convertible Subordinated Notes due December
15, 1997 (the "Notes"), and (ii) Warrants to purchase 60 shares of Common Stock
(the "Warrants"). Interest accrued but not paid on the Notes to the Expiration
Date will be paid in cash upon acceptance of the Units for exchange.
The Exchange Offer is conditioned upon, among other things, the valid
tender for exchange of not less than 11,400 Units (60% of the Units issued),
which tender has not been withdrawn. The Exchange Offer is also subject to
certain other conditions. See "The Exchange Offer -- Conditions of the Exchange
Offer" for other conditions. Holders of Notes and Warrants not tendered for
exchange pursuant to the Exchange Offer will continue to have all of the
existing rights granted in the Notes and Warrants. However, holders of Notes
tendered for exchange, by executing the Letter of Transmittal accompanying this
Offering Circular, will consent to the waiver of the applicability of any
anti-dilution provisions in the Notes which might be triggered as a result of
the Exchange Offer. See "Consent to Waiver of Anti-Dilution Provisions of Notes
with Respect to Exchange Offer."
The Common Stock is included in the Nasdaq National Market under the symbol
"SUBM." There is no active trading market for the Units, the Notes or the
Warrants. The Exchange Offer is being made by the Company in reliance on the
exemption from the registration requirements of the Securities Act of 1933 (the
"Securities Act") afforded by Section 3(a)(9) thereof. However, shares of Common
Stock issued in connection with the Units have been registered for resale by the
holders of the Units. Accordingly, any holder of Units who tenders Units in the
Exchange Offer will be able to sell the Common Stock issued in exchange therefor
as set forth under "Transferability of Common Stock." On July 3, 1996, the last
full day of trading prior to the public announcement of the commencement of the
Exchange Offer, the last reported sale price of the Common Stock on the Nasdaq
National Market was $8.25 per share. Holders of the Units are urged to obtain
current market quotations for the Common Stock.
The Company expressly reserves the right to extend the period of the
Exchange Offer, to terminate the Exchange Offer or to otherwise amend the
Exchange Offer in any respect, subject to the terms set forth in this Offering
Circular. See "The Exchange Offer -- Extension of Exchange Offer Period;
Termination; Amendments."
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
HOLDER OF UNITS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY
UNITS. EACH HOLDER OF UNITS MUST MAKE HIS OWN DECISION AS TO
WHETHER TO ACCEPT THE EXCHANGE OFFER, AND IF SO, HOW MANY UNITS
TO TENDER.
For a discussion of certain risks in connection with the Exchange Offer,
see "Risk Factors" commencing on page 7.
------------------------
THIS TRANSACTION AND THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
OFFERING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The Exchange Agent for the Exchange Offer is:
American Stock Transfer & Trust Company.
The date of this Offering Circular is July 8, 1996
<PAGE> 2
This Offering Circular does not constitute an offer or solicitation by the
Company or any other person for the exchange of any securities other than the
securities covered by this Offering Circular. The Exchange Offer is not being
made to, and tenders will not be accepted from or on behalf of, holders of
Notes and Warrants in any jurisdiction in which the making of the Exchange
Offer or acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, the Company may, in its reasonable discretion, take such
action as it may deem necessary to make the Exchange Offer in any such
jurisdiction and to extend the Exchange Offer to holders of Notes and Warrants
in such jurisdiction.
No person has been authorized to make any recommendation on behalf of the
Company as to whether holders of Notes and Warrants should tender their Notes
and Warrants pursuant to the Exchange Offer.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THOSE CONTAINED
HEREIN OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THE DELIVERY OF THIS OFFERING CIRCULAR AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
The Company is making the Exchange Offer in reliance on the exemption from
the registration requirements of the Securities Act afforded by Section 3(a)(9)
thereof. The Company therefore will not pay any commission or remuneration to
any broker, dealer, salesman or other person for soliciting tenders of Units.
Regular employees of the Company may solicit exchanges from the holders of the
Units, but such employees will not receive additional compensation therefor.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1995, its Quarterly Report on Form 10-Q for the quarter ended March 31, 1996,
its Notice of the Annual Meeting of Stockholders and Proxy Statement dated May
1, 1996 and its Current Report on Form 8-K dated March 26, 1996, as amended, all
of which have been filed by the Company with the Securities and Exchange
Commission, are attached to this Offering Circular as Exhibits A, B, C and D,
respectively, and are incorporated herein by this reference.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, DC 20549; and at its regional offices located at 7
World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, DC 20549 at prescribed rates. The Company has filed with the
Commission a statement on Schedule 13e-4 that contains additional information
with respect to the Exchange Offer. Such Schedule may be examined and copies may
be obtained at the same places and in the same manner as set forth above (except
that such Schedule may not be available in the regional offices of the
Commission).
1
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.................................... 1
AVAILABLE INFORMATION.............................................................. 1
SUMMARY OF OFFERING CIRCULAR....................................................... 3
The Company...................................................................... 3
Recent Developments.............................................................. 3
Purposes and Effects of the Exchange Offer....................................... 3
The Exchange Offer............................................................... 4
RISK FACTORS....................................................................... 7
PURPOSES AND EFFECTS OF THE EXCHANGE OFFER......................................... 11
SELECTED FINANCIAL AND PRO FORMA INFORMATION....................................... 12
CAPITALIZATION AND BOOK VALUE PER SHARE............................................ 17
PRICE RANGE OF COMMON STOCK........................................................ 18
DIVIDEND POLICY.................................................................... 18
THE EXCHANGE OFFER................................................................. 19
Terms of the Exchange Offer...................................................... 19
Acceptance Not Mandatory......................................................... 19
Procedure for Exchange........................................................... 19
Withdrawal Rights................................................................ 21
Acceptance of Units for Exchange................................................. 21
Accrued Interest................................................................. 22
Conditions of the Exchange Offer................................................. 22
Extension of Exchange Offer Period; Termination; Amendments...................... 23
Solicitation of Tenders; Fees.................................................... 24
Exchange Agent................................................................... 25
CONSENT TO WAIVER OF ANTI-DILUTION PROVISIONS OF NOTES WITH RESPECT TO EXCHANGE 25
OFFER............................................................................
TRANSFERABILITY OF COMMON STOCK.................................................... 25
INTEREST OF CERTAIN PERSONS IN THE TRANSACTION..................................... 26
TRANSACTIONS AND AGREEMENTS CONCERNING THE COMMON STOCK............................ 26
CERTAIN FEDERAL INCOME TAX CONSEQUENCES............................................ 26
DESCRIPTION OF NOTES............................................................... 27
General.......................................................................... 27
Principal and Interest........................................................... 27
Subordination.................................................................... 27
Conversion Rights................................................................ 27
Redemption....................................................................... 28
Sinking Fund..................................................................... 28
Events of Default................................................................ 28
Modification of the Notes........................................................ 29
DESCRIPTION OF WARRANTS............................................................ 29
DESCRIPTION OF CAPITAL STOCK....................................................... 29
General.......................................................................... 29
Common Stock..................................................................... 29
Preferred Stock.................................................................. 29
</TABLE>
EXHIBITS
EXHIBIT A -- Annual Report on Form 10-K for the year ended December 31, 1995
EXHIBIT B -- Quarterly Report on Form 10-Q for the quarter ended March 31, 1996
EXHIBIT C -- Notice of Annual Meeting of Stockholders and Proxy Statement dated
May 1, 1996
EXHIBIT D -- Current Report on Form 8-K dated March 26, 1996, as amended
2
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SUMMARY OF OFFERING CIRCULAR
The following summary is qualified in its entirety by reference to the more
detailed information, exhibits and financial statements, including the notes
thereto, appearing elsewhere herein. Please read this Offering Circular in its
entirety.
THE COMPANY
SubMicron Systems Corporation (together with its subsidiaries, the
"Company") designs and manufactures advanced automated chemical processing
systems for use in the production of high-performance semiconductor wafers (the
basic component of semiconductor devices) and integrated circuits. The Company's
primary products, known as "automated wet stations," perform precise and highly
controlled chemical processing of the silicon wafer onto which semiconductor
devices are fabricated and interconnected as well as perform certain cleaning
and film removal steps during the integrated circuit manufacturing cycle. The
Company operates in North America, Europe and Asia and provides full equipment
support and advanced process assistance to semiconductor manufacturers
worldwide.
For a more detailed description of the Company's business, see the
Company's Annual Report on Form 10-K for the year ended December 31, 1995
attached as Exhibit A hereto.
The Company is a Delaware corporation with its principal executive offices
located at 6620 Grant Way, Allentown, PA 18106, and its telephone number is
610-391-9200.
RECENT DEVELOPMENTS
On March 26, 1996, the Company acquired Imtec Acculine, Inc. ("Imtec"),
located in Sunnyvale, California, through the merger of a subsidiary of the
Company with and into Imtec. Pursuant to the merger, the Company issued an
aggregate of 575,000 shares of its Common Stock in exchange for the stock of
Imtec. As a result of the merger, Imtec became a wholly-owned subsidiary of the
Company.
Imtec's principal business is designing, developing, testing, manufacturing
and marketing temperature regulated baths for the semiconductor market and
related industries. Prior to the merger, the Company was a significant customer
of Imtec.
PURPOSES AND EFFECTS OF THE EXCHANGE OFFER
In December 1995, the Company completed a private placement to
approximately 30 accredited investors of $19 million principal amount of Notes
and Warrants to purchase 1,140,000 shares of Common Stock. The Notes are
convertible into shares of Common Stock at a conversion price of $11.64 per
share, subject to adjustment in certain instances. The Warrants are exercisable
to purchase shares of Common Stock at $14 per share.
In the several months following the closing of the private placement,
certain of the investors expressed disappointment that the Notes and the value
underlying the Warrants did not offer an immediate market return above the yield
of the Notes and indicated a desire to gain some liquidity from their
investment. During this period, the Company also was in the process of reviewing
ways to reduce its expenses, paying particular attention to the quarterly
interest costs associated with the Notes of $427,500, the amortization of the
discount on the Notes over a two-year period with a quarterly noncash charge to
earnings of $313,500, and the quarterly noncash charge for amortization of
deferred debt issuance costs of $213,000. Moreover, if not converted, the Notes
will have to be repaid in December 1997 and will be classified in the Company's
1996 year-end financial statements as a short-term obligation.
For the following reasons, the Company has decided to offer to exchange
shares of its Common Stock for the Notes and Warrants pursuant to the terms of
the Exchange Offer as set forth in this Offering Memorandum: (i) the
consummation of the Exchange Offer will substantially reduce or eliminate
(depending on the amount of Notes and Warrants accepted for exchange) the cash
interest payments on the Notes and
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the noncash amortization charges related to the discount on the Notes and
deferred debt issuance costs; and (ii) the Exchange Offer will result in a
substantial reduction in the leverage of the Company. The Company will, however,
recognize a one-time noncash operating charge in the quarter in which the
Exchange Offer is consummated based on (i) the fair market value of the
additional shares of Common Stock (49.1 shares) issued above the 85.9 shares of
Common Stock currently issuable upon conversion of $1,000 principal amount of
Notes (at a conversion price of $11.64 per share), plus (ii) the transaction
costs for the Exchange Offer, less (iii) the fair market value of the Warrants
exchanged. Based on the assumptions set forth in "Selected Financial and Pro
Forma Information," the noncash charge would be $3,756,855 or $5,994,756,
assuming a 60% or 100% exchange, respectively. See "Selected Financial and Pro
Forma Information."
Under the terms and subject to the conditions of the Exchange Offer,
tendering holders of Notes and Warrants will receive 135 shares of Common Stock
in exchange for each Unit where each Unit consists of (i) $1,000 principal
amount of Notes (such $1,000 principal amount bearing 9% interest per year
payable in cash and being convertible currently into 85.9 shares of Common Stock
at a conversion price of $11.64 per share, subject to adjustment), plus (ii)
Warrants to purchase 60 shares of Common Stock at $14 per share.
Holders of Notes and Warrants who do not tender and those who tender will
have the following relative rights in securities held with respect to each Unit:
<TABLE>
<CAPTION>
HOLDERS NOT TENDERING HOLDERS TENDERING
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<S> <C> <C>
Securities.................... $1,000 principal amount of 135 shares of Common Stock
Notes and Warrants to Purchase
60 Shares of Common Stock
Conversion of Notes........... Convertible into 85.9 shares Not applicable (will have
of Common Stock, subject to received 135 shares of Common
adjustment Stock)
Exercise of Warrants.......... Warrants exercisable at $14 Not applicable (will have
per share received 135 shares of Common
Stock)
Interest/Dividends............ Interest payable at the rate Dividends payable only when,
of 9% per annum on the Notes as and if declared by the
Company's Board of Directors
</TABLE>
There is no active trading market in the Notes or Warrants. The Common
Stock is traded on the Nasdaq Stock Market.
THE EXCHANGE OFFER
<TABLE>
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Exchange Ratio..................... 135 shares of Common Stock for each Unit, each Unit
consisting of $1,000 principal amount of Notes and
Warrants to purchase 60 shares of Common Stock.
Expiration Date.................... 5:00 p.m., New York City time, on August 5, 1996, unless
extended.
Minimum Amount to be Tendered...... The Company is not required to accept any Units tendered
for exchange in the Exchange Offer unless an aggregate
of 11,400 Units (equal to 60% of the outstanding Units)
are tendered and not withdrawn.
Acceptance of All Units............ Subject to the conditions of the Exchange Offer, the
Company intends to accept all Units duly tendered and
not withdrawn. If all Units are duly tendered and
accepted for exchange, a total of 2,565,000 shares of
Common Stock will be issued pursuant to the Exchange
Offer.
</TABLE>
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Withdrawal Rights.................. Tenders of Units pursuant to the Exchange Offer may be
withdrawn at any time until the Expiration Date and if
not yet accepted for exchange, after the expiration of
40 business days from the commencement of the Exchange
Offer. See "The Exchange Offer -- Withdrawal Rights."
How to Tender...................... A holder of Units wishing to accept the Exchange Offer
must complete the accompanying Letter of Transmittal and
forward it with the Notes and Warrants and any other
required documents to the Exchange Agent. Letters of
Transmittal and Notes and Warrants should not be sent to
the Company. See "The Exchange Offer -- Procedure for
Exchange."
Acceptance of Tenders and Issuance
of Common Stock.................. Subject to satisfaction of the terms and conditions of
the Exchange Offer, the Company will deliver shares of
Common Stock in exchange for Units accepted for exchange
as soon as practicable after the Expiration Date. See
"The Exchange Offer -- Acceptance of Units for
Exchange."
Accrued Interest................... Interest accrued on the Notes accepted for exchange from
June 15, 1996 until the Expiration Date shall be paid in
cash upon acceptance of the Notes for exchange. Interest
on Notes accepted for exchange will cease to accrue as
of the Expiration Date.
Conditions of the Exchange Offer... The Exchange Offer is subject to a number of conditions.
See "The Exchange Offer -- Conditions of the Exchange
Offer." In particular, the Exchange Offer may be
withdrawn by the Company if less than 11,400 Units are
properly tendered and not withdrawn pursuant to the
Exchange Offer.
Consent to Waiver of Anti-Dilution
Provisions for Exchange Offer.... Each holder who properly tenders Notes for exchange
pursuant to the Exchange Offer shall, by signing the
Letter of Transmittal as indicated therein, consent to
the waiver of the applicability of any anti-dilution
provisions in the Notes which might cause an adjustment
to the Conversion Price of the Notes or the number of
shares of Common Stock issuable upon conversion of the
Notes as the result of the Exchange Offer. Such waiver
will be effective provided that holders of at least 51%
of the aggregate principal amount of the Notes
outstanding sign such consent. See "Consent to Waiver of
Anti-Dilution Provisions of Notes with Respect to
Exchange Offer."
Certain Income Tax Consequences.... For a discussion of certain federal income tax
consequences, see "Certain Federal Income Tax
Consequences."
Risk Factors....................... Recipients of the Exchange Offer should consider
carefully the information set forth under the caption
"Risk Factors," and all other information set forth in
this Offering Circular.
Listing and Trading of
Securities....................... The Common Stock is included in the Nasdaq National
Market under the symbol "SUBM." There is no public
trading market for the Units, the Notes or the Warrants.
</TABLE>
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Transferability of Common Stock.... The Company has registered the shares of Common Stock
underlying the Notes and Warrants. Accordingly, upon
consummation of the Exchange Offer, the shares issued in
the Exchange Offer will be registered for resale by the
holders thereof. See "Transferability of Common Stock."
Market Price for Common Stock...... On July 3, 1996, the last reported sale price of the
Common Stock, as reported by Nasdaq, was $8.25 per
share.
Units Outstanding.................. There are 19,000 Units outstanding, comprised of an
aggregate of $19 million principal amount of Notes and
Warrants to purchase 1,140,000 shares of Common Stock.
Common Stock Outstanding........... As of June 15, 1996, there were 16,724,994 shares of
Common Stock outstanding.
Exchange Agent..................... American Stock Transfer & Trust Company.
</TABLE>
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RISK FACTORS
Investment in the Company's securities involves certain elements of risk.
The Common Stock included in the Exchange Offer involves different risks than
those risks associated with the Notes and Warrants. Holders of the Notes and
Warrants should consider carefully, among other things, the differences between
the Common Stock and the Notes and Warrants before making any decision to
exchange their Notes and Warrants for shares of Common Stock. Holders of the
Notes and Warrants who exchange their Notes and Warrants for Common Stock will
no longer be entitled to any of the rights and privileges of the Notes and
Warrants, including, but not limited to: (i) the right to quarterly interest
payments on the Notes; (ii) the priority of the Notes over the Common Stock upon
the liquidation of the Company; and (iii) certain anti-dilution protection
provided in the Notes (except as described under "Consent to Waiver of
Anti-Dilution Provisions of Notes with Respect to Exchange Offer").
In addition to the risk factors associated with the differences between the
Notes and Warrants and the Common Stock and the other information contained in
this Offering Circular, holders of the Notes and Warrants should also consider
carefully the following risk factors in evaluating the Company and its business
before making any decision to exchange the Notes and Warrants for shares of
Common Stock.
Product Concentration. Approximately 62% of the Company's net sales during
1995 were from sales of its automated wet stations. Should sales of automated
wet stations decline, the Company's results of operations would be materially
adversely affected. The ability of the Company to diversify its operations
through the modification and enhancement of its existing system or through the
introduction of new products is dependent upon the success of the Company's
continuing research and development activities. No assurance can be given that
the Company will be successful in its development efforts or that any new
products or improvements will achieve sustained market acceptance.
Quarterly Fluctuations. The Company's results of operations have varied
significantly from quarter to quarter. Although the Company was profitable for
1995 as a whole, the Company recognized losses during the second and third
quarters of 1995 of $2,212,000 and $343,000, respectively. These fluctuations,
which are likely to continue, are a result of several factors, including in
particular the relatively high price of the Company's products in relation to
quarterly sales, the lead time required to manufacture such products and the
Company's accounting method of recognizing revenue from a system sale at the
time of title transfer, which ordinarily occurs at the time of shipment.
Consequently, delays in the shipment of even one or two systems could have a
significant impact on the results of operations for a particular quarter.
Accordingly, quarterly results are likely to fluctuate and the results for any
fiscal quarter may not be indicative of results for future fiscal quarters.
In addition, the Company will record a one-time noncash operating charge on
its statement of operations in the quarter in which the Exchange Offer is
consummated. The charge will be based on (i) the fair market value of the
additional shares of Common Stock (49.1 shares) issued above the 85.9 shares of
Common Stock currently issuable upon conversion of $1,000 principal amount of
Notes (at a Conversion Price of $11.64 per share), plus (ii) the transaction
costs for the Exchange Offer, less (iii) the fair market value of the Warrants
exchanged. Since the amount of such charge will be based on the value of the
Common Stock on the Expiration Date, the amount of the charge is not currently
determinable. For a calculation of such charge based on certain assumptions
specified therein, see "Selected Financial and Pro Forma Information."
Significant Capital Requirements. In recent years the Company has been
substantially dependent upon borrowings and cash flow from operations to finance
its operations. The Company currently has a credit facility, which is subject to
renewal in August 1997, under which the Company can borrow up to $30 million
based on a borrowing base formula tied to qualified receivables. As of March 31,
1996, approximately $16 million was drawn down under the credit facility and the
borrowing base was approximately $25 million. The Company believes that the
funds available under its credit facility, together with cash flow from
operations, will be sufficient to finance the Company's growth for the immediate
future. However, there can be no assurances that as the Company continues to
grow, additional financing will not be necessary and that, if needed, additional
financing will be available on acceptable terms, or at all. Any inability to
obtain additional financing could have a material adverse effect on the Company.
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Customer Concentration. Sales of the Company's products to a single
customer accounted for 11% of the Company's total sales for 1995, and sales to
two different customers accounted for 15% and 13%, respectively, of the
Company's total sales for 1994. Sales of the Company's products to three
customers accounted for 43% of total sales for the three months ended March 31,
1996. Accounts receivable for the two largest customers represented 22% of
consolidated receivables as of March 31, 1996 and 48% of consolidated
receivables as of December 31, 1995. There is no indication that customer
concentration will decrease in the foreseeable future. In the event any of these
or other significant customers cancel or delay orders or are unable to make
payment, the Company's operating results and financial condition could be
materially adversely affected.
Competition and Technological Change. The development of semiconductor
manufacturing equipment is characterized by rapidly advancing technology, and
the Company encounters intense competition in the development and marketing of
its products, particularly from several major Japanese companies. Many of the
Company's competitors have substantially greater financial resources than the
Company. The future success of the Company will depend in large part upon its
ability to keep pace with advancing semiconductor manufacturing technology and
industry standards. In this regard, rapid changes have occurred, and are likely
to continue to occur, as semiconductor devices become more sophisticated. To
remain competitive, the Company will have to demonstrate its ability to produce
sufficiently sophisticated and reliable manufacturing equipment at competitive
prices. There can be no assurance that the Company's products or development
efforts will not be rendered obsolete by research efforts and technological
advances made by others.
Risks Associated with Acquisitions. The Company has pursued and intends to
continue to pursue acquisitions as a key component of its growth strategy.
Certain risks are inherent in an acquisition strategy, such as increasing
leverage, diversion of management time and attention and combining disparate
company cultures and facilities, which could adversely affect the Company's
operating results. The success of any completed acquisition will depend in part
on the Company's ability to integrate effectively the acquired business into the
Company's other operations. The process of integrating such acquired businesses
may involve unforeseen difficulties and may utilize a substantial portion of the
Company's financial and other resources. No assurance can be given that
additional suitable acquisition candidates will be identified, financed and
purchased on acceptable terms, or, if completed, will be successful.
Exchange Offer is a Taxable Transaction. The exchange of Notes and
Warrants for shares of Common Stock pursuant to the Exchange Offer is a taxable
transaction. The amount of any gain or loss recognized by holders of Notes and
Warrants will depend on the value of the shares of Common Stock received, which
will be based on the value of the Common Stock on the Expiration Date. See
"Certain Federal Income Tax Consequences."
Fluctuations in the Semiconductor Market. The semiconductor industry is
subject to short-term market fluctuations and is susceptible to periodic
downturns or shipment delays, which often have an exaggerated effect on
manufacturers of semiconductor production equipment. The Company, however, has
historically targeted its products to advanced future generation manufacturers
which, to date, have been less sensitive to short-term market fluctuations.
There can be no assurances, however, that the Company will not be materially
adversely affected by such fluctuations in the future. The future operations of
the Company may, therefore, be dependent in large part on the level of market
demand for advanced integrated circuit devices, particularly more sophisticated
devices, and the resulting capital expenditures of semiconductor manufacturing
companies purchasing fabrication products. The semiconductor industry reportedly
has begun to experience a softening of demand which could lead to reduced future
sales and pricing pressures.
Lack of Patent Protection. Although the Company has certain patents and
has applied for other patents with respect to certain of its products, there can
be no assurance that all of the Company's proprietary technology will be
effectively protected by patents. Despite the protection provided by such
patents, it may be possible for competitors to copy one or more aspect of the
Company's products or obtain information that the Company regards as
proprietary. Furthermore, there can be no assurance that others will not
independently develop products similar to those sold by the Company. Although
the Company believes that the products sold by it do not infringe upon the
patents or violate proprietary rights of others, it is possible that such an
infringement or violation may occur. In the event the products sold by the
Company are deemed to infringe
8
<PAGE> 10
upon the patents or proprietary rights of others, the Company could be required
to modify its products or obtain a license for the manufacture or sale of such
products. There can be no assurance that, in such an event, the Company would be
able to do so in a timely manner, upon acceptable terms and conditions, or at
all, and the failure to do any of the foregoing could have a material adverse
effect upon the Company. In addition, the Company could become liable for
damages in the event its products were deemed to infringe upon the patents or
proprietary rights of others, which could also have a material adverse effect on
the Company. Moreover, there can be no assurance that the Company will have the
financial or other resources necessary to enforce or defend a patent
infringement or a proprietary rights violation action.
Security Interests; Restrictive Covenants. The Company has granted
security interests with respect to substantially all of its assets to secure its
indebtedness under its current credit facility. In the event a secured lender
exercises its rights upon the occurrence of an event of default, such secured
lender could declare the Company's indebtedness to be immediately due and
payable and foreclose on the assets securing the defaulted indebtedness.
Moreover, to the extent that substantially all of the Company's assets continue
to be pledged to secure outstanding indebtedness, such assets will not be
available to secure additional indebtedness. The Company's credit facility
restricts the ability of the Company to incur additional indebtedness. In
addition, the Company will be required to repay in December 1997 any Notes that
are not exchanged in the Exchange Offer or converted prior to such date.
Reliance on Key Executives and Employees. The Company is dependent upon
the continued services and management experience of David F. Levy, President and
Chief Executive Officer, James S. Molinaro, President of SubMicron Systems,
Inc., the Company's principal operating subsidiary, and John P. Traub, President
of Systems Chemistry Incorporated. The loss of the services of any of these
executives might have a material adverse effect upon the Company. The Company
carries key person life insurance policies in the face amount of $1,500,000 on
each of Messrs. Levy and Molinaro. The Company has entered into employment
agreements with Messrs. Levy, Molinaro and Traub which have an initial five-year
term expiring in 1998 (as to Messrs. Levy and Molinaro) and in 2000 (as to Mr.
Traub), each of which is automatically renewable at the end of such term for an
additional year and each year thereafter unless either party to the respective
agreements gives notice of nonrenewal.
The ability of the Company to compete successfully in the future will also
depend in large part on its ability to recruit and maintain a technically
competent research and development staff. Competition for qualified research and
development employees is intense. There can be no assurance that the Company
will be able to retain existing employees or that it will be able to find,
attract and retain qualified personnel on acceptable terms.
Control by Certain Stockholders. At June 15, 1996, David F. Levy and James
S. Molinaro beneficially owned approximately 22% of the outstanding shares of
Common Stock. Accordingly, Messrs. Levy and Molinaro are able to have
substantial influence in the election of the Company's Board of Directors and
thereby the policies of the Company. Messrs. Levy and Molinaro have entered into
an agreement that provides for all of their shares of Common Stock to be voted
at their joint direction. In the event that Messrs. Levy and Molinaro are unable
to agree on how to vote their shares, they are to appoint a special voting
trustee to break the deadlock. If Messrs. Levy and Molinaro are unable to agree
on the designation of a special voting trustee, the shares subject to the
agreement will be voted in accordance with the vote of the majority of shares of
Common Stock not subject to the agreement.
Shares Eligible for Future Sale. At June 15, 1996, the Company had
outstanding a total of 16,724,994 shares of Common Stock and outstanding
warrants and options entitling the holders thereof to purchase an aggregate of
2,110,968 additional shares (other than the Warrants which are part of the
Units). All outstanding shares are, and all shares issuable upon the exercise of
options and warrants (as well as upon conversion of any Notes or exercise of any
Warrants not exchanged pursuant to the Exchange Offer) will be, available for
resale in the public market without restriction, with the exception of an
aggregate of 3,789,754 outstanding shares held by affiliates of the Company and
793,750 shares issuable upon the exercise of options or warrants held by such
affiliates. If the outstanding options and warrants are exercised, the
stockholders of the Company will be subject to additional dilution.
9
<PAGE> 11
Under Rule 144 promulgated under the Act, affiliates of the Company are
permitted to sell, every three months, in ordinary brokerage transactions or in
transactions directly with a market maker an amount equal to the greater of one
percent of the Company's outstanding Common Stock or the average weekly trading
volume during the four calendar weeks prior to the sale.
The sale of any substantial number of these shares could have an adverse
effect on the future market price of the Common Stock.
No Dividends. The Company does not anticipate paying any cash dividends in
the foreseeable future as earnings, if any, will be retained to finance the
Company's operations and to expand its business. Moreover, under the Company's
credit facility, the Company is restricted in its ability to declare dividends.
Potential Anti-Takeover Effects of Delaware Law; Classified Board; Possible
Issuances of Preferred Stock. Certain provisions of Delaware law could delay or
impede the removal of incumbent directors and could make more difficult a
merger, tender offer or proxy contest involving the Company, even if such events
could be beneficial to the interests of stockholders. Such provisions could
limit the price that certain investors might be willing to pay in the future for
shares of Common Stock. In addition, the Company's Certificate of Incorporation
provides that the Company's Board of Directors is to be composed of three
classes, with staggered three-year terms, each class to contain as nearly as
possible one-third of the whole number of members of the Company's Board. The
Company's stock option plans each provide for immediate vesting of all then
outstanding options upon the occurrence of a "change of control" of the Company
(as defined therein). The existence of a classified board, as well as these
option vesting provisions, may reduce the Company's vulnerability to takeovers
by other corporations or persons which, in the judgment of the Company's Board,
may not be in the best interests of the Company's stockholders. However, the
effect of a classified board and such accelerated option vesting provisions may
also serve to entrench the Company's Board. Moreover, shares of preferred stock
may be issued by the Company's Board without stockholder approval on such terms
as the Company's Board may determine. The rights of the holders of Common Stock
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that may be issued in the future. Although the ability to
issue preferred stock may provide flexibility in connection with possible
acquisitions and other corporate purposes, such issuance may make it more
difficult for a third party to acquire, or may discourage a third party from
acquiring, a majority of the voting stock of the Company. The Company has no
current plans to issue any shares of preferred stock.
10
<PAGE> 12
PURPOSES AND EFFECTS OF THE EXCHANGE OFFER
On December 13, 1995, the Company completed a private placement to
approximately 30 accredited investors pursuant to Regulation D under the
Securities Act of $19 million principal amount of Notes and Warrants to purchase
1,140,000 shares of Common Stock. The Notes are convertible into shares of
Common Stock, at a conversion price of $11.64 per share, subject to adjustment
in certain instances. The Warrants are exercisable to purchase shares of Common
Stock at $14 per share.
The Warrants were valued at $2,508,000 and, accordingly, this amount was
recorded as a discount on the Notes and is being amortized over the term of the
Notes, resulting in a quarterly noncash charge to the Company's earnings of
$313,500. In addition, holders of the Notes and Warrants are recognizing a
comparable amount as income for federal income tax purposes.
In the several months following the closing of the sale of the Notes and
Warrants, certain of the investors expressed disappointment that the Notes and
the value underlying the Warrants did not offer an immediate market return above
the yield of the Notes and indicated a desire to gain some liquidity from their
investment. During this period, the Company began to review ways to reduce its
expenses, paying particular attention to the quarterly interest costs associated
with the Notes of $427,500, the amortization of the discount on the Notes over a
two-year period with a quarterly noncash charge to earnings of $313,500, and the
quarterly noncash charge for amortization of deferred debt issuance costs of
$213,000. Moreover, if not converted, the Notes will have to be repaid in
December 1997 and will be classified in the Company's 1996 year-end financial
statements as a short-term obligation.
For the following reasons, the Company has decided to offer to exchange
shares of its Common Stock for the Notes and Warrants pursuant to the terms of
the Exchange Offer as set forth in this Offering Memorandum: (i) the
consummation of the Exchange Offer will substantially reduce or eliminate
(depending on the amount of Notes and Warrants accepted for exchange) the cash
interest payments on the Notes and the noncash amortization charges related to
the discount on the Notes and the deferred debt issuance costs; and (ii) the
Exchange Offer will result in a substantial reduction in the leverage of the
Company. The Company will, however, recognize a one-time noncash operating
charge in the quarter in which the Exchange Offer is consummated based on (i)
the fair market value of the additional shares of Common Stock (49.1 shares)
issued above the 85.9 shares of Common Stock currently issuable upon conversion
of $1,000 principal amount of Notes (at a Conversion Price of $11.64 per share),
plus (ii) the transaction costs for the Exchange Offer, less (iii) the fair
market value of the Warrants exchanged. The Company will retire any Notes and
Warrants accepted for exchange and has no present plans to reissue such
securities.
11
<PAGE> 13
SELECTED FINANCIAL AND PRO FORMA INFORMATION
The following table shows the pro forma effects the Exchange Offer would
have had on the Company for the year ended December 31, 1995 and at and for the
three months ended March 31, 1996 if the specified percentages of the Notes and
Warrants had been exchanged on such date or on the first day of said periods,
based on the assumptions set forth below:
SUBMICRON SYSTEMS CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA 100% PRO PRO FORMA
60% PRO FORMA ASSUMING 60% FORMA ASSUMING 100%
HISTORICAL ADJUSTMENTS(1) EXCHANGE ADJUSTMENTS(1) EXCHANGE
------------ ------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents............ $ 8,859,048 $ -- $ 8,859,048 $ -- $ 8,859,048
Accounts receivable,
net.................... 39,814,411 -- 39,814,411 -- 39,814,411
Inventories, net.......... 42,811,138 -- 42,811,138 -- 42,811,138
Prepaids and other........ 4,035,344 -- 4,035,344 -- 4,035,344
Refundable income taxes... -- 372,572 372,572 963,889 963,889
Deferred income taxes..... 1,886,323 -- 1,886,323 -- 1,886,323
------------ ------------- ------------ -------------- -------------
Total current assets... 97,406,264 372,572 97,778,836 963,889 98,370,153
Property and equipment,
net....................... 12,951,974 -- 12,951,974 -- 12,951,974
Goodwill, net............... 1,854,895 -- 1,854,895 -- 1,854,895
Intangibles and other,
net....................... 4,713,304 (895,337) 3,817,967 (1,492,229) 3,221,075
------------ ------------- ------------ -------------- -------------
$116,926,437 $ (522,765) $116,403,672 $ (528,340) $ 116,398,097
=========== =========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit........... $ 15,900,000 $ -- $ 15,900,000 $ -- $ 15,900,000
Current portion of
long-term debt......... 1,089,720 -- 1,089,720 -- 1,089,720
Accounts payable.......... 18,162,502 -- 18,162,502 -- 18,162,502
Accrued expenses and
other.................. 9,152,958 400,000 9,552,958 400,000 9,552,958
Deferred revenues......... 4,433,388 -- 4,433,388 -- 4,433,388
Income taxes payable...... 674,403 (674,403) -- (674,403) --
------------ ------------- ------------ -------------- -------------
Total current
liabilities.......... 49,412,971 (274,403) 49,138,568 (274,403) 49,138,568
------------ ------------- ------------ -------------- -------------
Deferred income taxes....... 628,073 -- 628,073 -- 628,073
------------ ------------- ------------ -------------- -------------
Deferred revenues........... 103,209 -- 103,209 -- 103,209
------------ ------------- ------------ -------------- -------------
Long-term debt.............. 18,936,963 (10,114,650) 8,822,313 (16,857,750) 2,079,213
------------ ------------- ------------ -------------- -------------
Commitments and
contingencies
Stockholders' equity:
Preferred stock........... -- -- -- -- --
Common stock.............. 1,658 154 1,812 257 1,915
Additional
paid-in-capital........ 39,490,949 12,576,012 52,066,961 20,960,020 60,450,969
Retained earnings......... 8,553,154 (2,709,878) 5,843,276 (4,356,464) 4,196,690
Deferred compensation..... (140,025) -- (140,025) -- (140,025)
Notes receivable.......... (60,515) -- (60,515) -- (60,515)
------------ ------------- ------------ -------------- -------------
Total stockholders'
equity............... 47,845,221 9,866,288 57,711,509 16,603,813 64,449,034
------------ ------------- ------------ -------------- -------------
$116,926,437 $ (522,765) $116,403,672 $ (528,340) $ 116,398,097
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
12
<PAGE> 14
SUBMICRON SYSTEMS CORPORATION
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
60% PRO PRO FORMA 100% PRO ASSUMING
FORMA ASSUMING 60% FORMA 100%
HISTORICAL ADJUSTMENTS EXCHANGE ADJUSTMENTS EXCHANGE
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
System sales, net...... $ 92,294,150 $ -- $ 92,294,150 $ -- $ 92,294,150
Services and other
sales................ 30,773,804 -- 30,773,804 -- 30,773,804
------------ ------------ ------------ ------------ ------------
Total net
sales...... 123,067,954 -- 123,067,954 -- 123,067,954
------------ ------------ ------------ ------------ ------------
Cost of system sales... 63,666,000 -- 63,666,000 -- 63,666,000
Cost of service and
other sales.......... 20,685,736 -- 20,685,736 -- 20,685,736
------------ ------------ ------------ ------------ ------------
Total cost of
sales...... 84,351,736 -- 84,351,736 -- 84,351,736
------------ ------------ ------------ ------------ ------------
Gross
profit..... 38,716,218 -- 38,716,218 -- 38,716,218
Selling, general and
administrative....... 29,108,739 -- 29,108,739 -- 29,108,739
Research and
development.......... 5,678,517 -- 5,678,517 -- 5,678,517
------------ ------------ ------------ ------------ ------------
Operating
income..... 3,928,962 -- 3,928,962 -- 3,928,962
------------ ------------ ------------ ------------ ------------
Other income (expense):
Interest income...... 399,911 -- 399,911 -- 399,911
Interest expense..... (1,840,182) 118,950(1) (1,721,232) 198,250(1) (1,641,932)
Other, net........... 2,698,220 -- 2,698,220 -- 2,698,220
------------ ------------ ------------ ------------ ------------
Total other
income..... 1,257,949 118,950 1,376,899 198,250 1,456,199
------------ ------------ ------------ ------------ ------------
Income before income
taxes................ 5,186,911 118,950 5,305,861 198,250 5,385,161
Income tax provision... 1,497,689 47,580(2) 1,545,269 79,300(2) 1,576,989
------------ ------------ ------------ ------------ ------------
Net income... $ 3,689,222 $ 71,370 3,760,592 $ 118,950 $ 3,808,172
============ ============ ============ ============ ============
Net income per Common
share................ $ 0.23 $ 0.23(3) $ 0.23(3)
============ ============ ============
Weighted Average number
of shares of Common
stock outstanding.... 16,159,687 64,125(3) 16,223,812 106,875(3) 16,266,562
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
13
<PAGE> 15
SUBMICRON SYSTEMS CORPORATION
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
60% PRO PRO FORMA 100% PRO ASSUMING
FORMA ASSUMING 60% FORMA 100%
HISTORICAL ADJUSTMENTS EXCHANGE ADJUSTMENTS EXCHANGE
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
System sales, net...... $ 39,422,070 $ -- $ 39,422,070 $ -- $ 39,422,070
Services and other
sales................ 5,431,839 -- 5,431,839 -- 5,431,839
------------ ------------ ------------ ------------ ------------
Total net
sales...... 44,853,909 -- 44,853,909 -- 44,853,909
------------ ------------ ------------ ------------ ------------
Cost of system sales... 26,436,182 -- 26,436,182 -- 26,436,182
Cost of service and
other sales.......... 4,112,386 -- 4,112,386 -- 4,112,386
------------ ------------ ------------ ------------ ------------
Total cost of
sales...... 30,548,568 -- 30,548,568 -- 30,548,568
------------ ------------ ------------ ------------ ------------
Gross
profit..... 14,305,341 -- 14,305,341 -- 14,305,341
Selling, general and
administrative....... 9,455,292 -- 9,455,292 -- 9,455,292
Research and
development.......... 1,844,963 -- 1,844,963 -- 1,844,963
------------ ------------ ------------ ------------ ------------
Operating
income..... 3,005,086 -- 3,005,086 -- 3,005,086
------------ ------------ ------------ ------------ ------------
Other income (expense):
Interest income...... 168,200 -- 168,200 -- 168,200
Interest expense..... (1,022,968) 527,612(1) (495,356) 879,354(1) (143,614)
Other, net........... 80,661 -- 80,661 -- 80,661
------------ ------------ ------------ ------------ ------------
Total other
income
(expense)... (774,107) 527,612 (246,495) 879,354 105,247
------------ ------------ ------------ ------------ ------------
Income before income
taxes................ 2,230,979 527,612 2,758,591 879,354 3,110,333
Income tax provision... 780,843 211,045(2) 991,888 351,742(2) 1,132,585
------------ ------------ ------------ ------------ ------------
Net income........ $ 1,450,136 $ 316,567 $ 1,766,703 $ 527,612 $ 1,977,748
============ ============ ============ ============ ============
Net income per Common
share................ $ 0.09 $ 0.10(3) $ 0.10(3)
============ ============ ============
Weighted Average number
of shares of Common
stock outstanding.... 16,943,961 1,539,000(3) 18,482,961 2,565,000(3) 19,508,961
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
14
<PAGE> 16
SUBMICRON SYSTEMS CORPORATION
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The pro forma consolidated balance sheet as of March 31, 1996, and the pro
forma consolidated statements of operations for the year ended December 31, 1995
and three months ended March 31, 1996, give effect to the Exchange Offer
assuming a minimum exchange of 60% of the Units and a maximum exchange of 100%
of the Units. Each Unit is exchangeable for 135 shares of Common Stock. The pro
forma adjustments assume a fair market market value of $8.25 per share of Common
Stock issuable pursuant to the Exchange Offer and a $2,100,000 assumed fair
market value for the Warrants exchanged (based on various warrant valuation
models). The actual adjustments to be recorded will be based on the fair market
value of the Common Stock issuable and Warrants to be exchanged as of the
Expiration Date.
PRO FORMA CONSOLIDATED BALANCE SHEET ADJUSTMENTS:
(1) The pro forma balance sheet adjustments to record the Exchange Offer at
the assumed exchange levels are as follows:
<TABLE>
<CAPTION>
60% 100%
EXCHANGE EXCHANGE
----------- -----------
<S> <C> <C>
Subordinated notes (long-term debt)(a)...................... $10,114,650 $16,857,750
Debt conversion expense (retained earnings)(b).............. 3,756,853 5,994,756
Warrants outstanding (additional paid-in capital)(c)........ 1,260,000 2,100,000
Refundable income taxes(d).................................. 372,572 963,889
Income taxes payable(d)..................................... 674,403 674,403
Common stock(e)........................................ (154) (257)
Additional paid-in capital(d)(e)....................... (13,836,012) (23,060,020)
Deferred debt costs (intangibles)(f)................... (895,337) (1,492,229)
Accrued expenses(g).................................... (400,000) (400,000)
Income tax expense (retained earnings)(d).............. (1,046,975) (1,638,292)
</TABLE>
- ---------------
(a) Represents a reduction in long-term debt for the carrying value of the Notes
exchanged.
(b) Computed based on the incremental shares of Common Stock issuable upon the
Exchange Offer compared to the number of shares of Common Stock that would
have been issued had the current conversion price of $11.64 per share been
in effect, multiplied by the assumed fair market value per share of the
Common Stock issuable as of the Expiration Date, plus transaction costs
estimated at $400,000 and less the assumed fair market value of the Warrants
to be exchanged.
(c) Represents the assumed current fair market value of the Warrants to be
exchanged as part of the Exchange Offer.
(d) Tax benefit of the debt conversion expense recorded for financial reporting
purposes.
(e) Represents the Common Stock issuable upon the exchange.
(f) Write-off of unamortized deferred debt costs incurred in connection with the
issuance of the Units in December 1995.
(g) Represents the estimated transaction costs to be incurred in connection with
the Exchange Offer.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS ADJUSTMENTS:
(1) Reflects the reduction of interest expense for elimination of (i) the
9% interest on the Notes, (ii) amortization of the debt discount and (iii)
amortization of the deferred debt financing costs for the periods presented as
if the Exchange Offer had occurred as of December 13, 1995 for the pro forma
consolidated statement of operations for the year ended December 31, 1995 and as
of January 1, 1996 for the pro forma consolidated statement of operations for
the three months ended March 31, 1996.
15
<PAGE> 17
Based on the assumptions outlined in the introduction to the notes to pro
forma consolidated financial statements, the Company will record a pre-tax debt
conversion charge to operations in the third quarter of 1996 of approximately
$3,757,000 and $5,995,000 assuming 60% and 100% of the Units are exchanged,
respectively, upon consummation of the exchange. The Company will record an
income tax benefit of approximately $1,047,000 and $1,638,000 based on such
assumptions, respectively. This net charge will reduce net income per Common
share by $.15 assuming 18,111,894 outstanding shares (60% conversion) and by
$.23 assuming 19,137,894 outstanding shares (100% conversion) in 1996.
(2) Represents the income tax benefit from the pro forma adjustments to
reduce interest expense at an effective income tax rate of 40%.
(3) Net income per Common share reflects the Common Stock issuable pursuant
to the Exchange Offer but does not reflect the debt conversion expense which
will be recorded in the period that the exchange is consummated.
RATIO OF EARNINGS TO FIXED CHARGES:
Earnings are defined as income before income taxes and fixed charges. Fixed
charges are defined as interest expense and a portion of rental expense
representing the interest factor which the Company estimates to be one-third of
rentals. The historical ratio of earnings to fixed charges was 2.97x for the
three months ended March 31, 1996. The pro forma ratio is 5.70x and 14.19x
assuming an exchange of 60% and 100%, respectively. The historical ratio of
earnings to fixed charges for 1995 is not meaningful as the Notes were issued
during December 1995.
16
<PAGE> 18
CAPITALIZATION AND BOOK VALUE PER SHARE
The following table sets forth the capitalization and the book value per
share of the Company at March 31, 1996 and as adjusted to give effect to the
Exchange Offer (assuming 60% and 100% of the Units, respectively, are
exchanged):
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------------------------
AS
ADJUSTED,
60% AS ADJUSTED,
HISTORICAL EXCHANGE 100% EXCHANGE
----------- ----------- -------------
<S> <C> <C> <C>
Long-term debt:
9% Convertible subordinated notes................ $16,857,750 $ 6,743,100 $ --
Other long-term debt............................. 2,079,213 2,079,213 2,079,213
------------ ------------ ------------
Total Long-Term Debt..................... 18,936,963 8,822,313 2,079,213
------------ ------------ ------------
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares
authorized, none issued and outstanding....... -- -- --
Common stock, $.0001 par value, 100,000,000
shares authorized, 16,572,894 issued and
outstanding (actual) 18,111,894 and 19,137,894
shares outstanding (as adjusted).............. 1,658 1,812 1,915
Additional paid-in capital....................... 39,490,949 52,066,961 60,450,969
Retained earnings................................ 8,553,154 5,843,276 4,196,690
Deferred compensation............................ (140,025) (140,025) (140,025)
Notes receivable................................. (60,515) (60,515) (60,515)
------------ ------------ ------------
Total stockholders' equity............... 47,845,221 57,711,509 64,449,034
------------ ------------ ------------
Total capitalization..................... $66,782,184 $66,533,822 $66,528,247
============ ============ ============
Book value per share(1)............................ $ 2.89 $ 3.19 $ 3.37
============ ============ ============
</TABLE>
- ------------------------
(1) The historical book value per share at December 31, 1995 was $2.78.
17
<PAGE> 19
PRICE RANGE OF COMMON STOCK
The Common Stock is traded on the Nasdaq National Market under the symbol
"SUBM." The following table sets forth the high and low closing sales price of
the Common Stock for the periods indicated, as reported by Nasdaq:
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
----------------------------------------------- ---- ---
<S> <C> <C>
1994:
March 31..................................... $ 7 5/8 $ 5 5/8
June 30...................................... 6 1/8 3 5/8
September 30................................. 6 1/4 4
December 31.................................. 6 3/4 4 1/2
1995:
March 31..................................... 7 3/16 4 1/8
June 30...................................... 12 6 3/4
September 30................................. 14 8 3/8
December 31.................................. 11 7/8 9 3/8
1996:
March 31..................................... 11 1/4 8 3/8
June 30...................................... 10 11/16 7 7/8
September 30 (to July 3)..................... 8 7/8 8 1/4
</TABLE>
DIVIDEND POLICY
The Company has not paid any dividends on its Common Stock. The Company
presently intends to retain any earnings to finance growth and, therefore, does
not anticipate paying dividends on the Common Stock in the foreseeable future.
In addition, the Company's revolving credit arrangement with a bank places
restrictions on the payment of dividends.
18
<PAGE> 20
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Offering Circular and in the accompanying Letter of Transmittal,
to exchange 135 shares of Common Stock for each Unit, each Unit consisting of
$1,000 principal amount of Notes and Warrants to purchase 60 shares of Common
Stock, that is validly deposited and tendered and not withdrawn prior to the
Expiration Date. Interest accrued on the Notes through the Expiration Date will
be paid in cash upon acceptance of the Notes for exchange. Interest on Notes
tendered and accepted for exchange which are not withdrawn as permitted will
cease to accrue on the Expiration Date.
The Exchange Offer is subject to a number of conditions. See "The Exchange
Offer -- Conditions of the Exchange Offer." There are 19,000 Units outstanding.
The Exchange Offer is being made for any and all Units and is subject to, among
other things, a minimum of 11,400 Units (60% of the Units) being tendered and
not withdrawn. The Company reserves the right to terminate or amend the Exchange
Offer at any time on or prior to the Expiration Date upon the occurrence of any
of such conditions.
The Exchange Offer expires at 5:00 p.m., New York City time, on August 5,
1996 unless the Company, in its reasonable discretion, extends the period of
time which the Exchange Offer is open, in which event the "Expiration Date"
shall mean the latest time and date to which the Exchange Offer is extended.
Only Notes and Warrants validly deposited and tendered prior to the Expiration
Date will be eligible for exchange. See "The Exchange Offer -- Extension of
Exchange Offer Period; Termination; Amendments."
ACCEPTANCE NOT MANDATORY
Each holder of the Units is free to exchange or not exchange his Units
pursuant to the Exchange Offer and may tender all or a portion of his Notes and
Warrants by properly completing and delivering a Letter of Transmittal, together
with the Notes and Warrants being exchanged, in Units of $1,000 principal amount
of Notes and Warrants to purchase 60 shares of Common Stock, and any other
required documents to the Exchange Agent. Holders of the Notes and Warrants not
deposited and tendered for exchange pursuant to the Exchange Offer will continue
to have all of the existing rights and preferences of the Notes and Warrants,
including (i) the right to quarterly interest payments on the Notes, (ii) the
right to convert the Notes into shares of Common Stock at $11.64 per share,
subject to future adjustment upon the occurrence of certain events, (iii) the
right to exercise the Warrants in accordance with their terms at $14 per share,
(iv) the priority of the Notes over the Common Stock upon the liquidation of the
Company, and (v) certain anti-dilution protection provided in the Notes.
However, in the event the Exchange Offer proceeds, holders of at least 51% of
the aggregate principal amount of the Notes will have consented to waive the
anti-dilution provisions of the Notes with respect to the Exchange Offer.
Accordingly, there will be no adjustment to the Conversion Price or number of
shares which will be issued upon conversion of the Notes as a result of the
Exchange Offer. See "Consent to Waiver of Anti-Dilution Provisions of Notes with
Respect to Exchange Offer"; "Description of Notes"; "Description of Warrants";
and "Description of Capital Stock."
PROCEDURE FOR EXCHANGE
Any holder of Notes and Warrants desiring to deposit and tender all or any
portion of his Notes and Warrants must deliver the Notes and Warrants, in Units
of $1,000 principal amount of Notes and Warrants to purchase 60 shares of Common
Stock, together with a properly completed and duly executed Letter of
Transmittal with any required signature guarantees and any other required
documents to the Exchange Agent. Such Notes, Warrants and other documents must
be received by the Exchange Agent, on or prior to the Expiration Date of the
Exchange Offer at the address specified below under "The Exchange Offer --
Exchange Agent." LETTERS OF TRANSMITTAL AND THE NOTES AND WARRANTS SHOULD NOT BE
SENT TO THE COMPANY. Signatures on Letters of Transmittal must be guaranteed by
a firm that is a member of a recognized Medallion Program approved by The
Securities Transfer Association, Inc. (an "Eligible Institution") except
signatures on Letters of Transmittal need not be guaranteed by an Eligible
19
<PAGE> 21
Institution provided that the Notes and the Warrants deposited and tendered
pursuant thereto are deposited and tendered (i) by a registered holder of the
Note and the Warrants who has not completed either the box entitled "Special
Issuance Instructions" or the box entitled "Special Mailing Instructions" on the
Letter of Transmittal or (ii) for the account of an Eligible Institution. If the
Notes and Warrants are registered in the name of a person other than the signer
of the Letter of Transmittal, the Notes and the Warrants must be endorsed by, or
be accompanied by a written instrument or instruments of transfer or exchange in
form satisfactory to the Company duly executed by, the registered holder, with
signatures thereon guaranteed as set forth above. Delivery of Notes and Warrants
may not be effected through Book Entry Transfer, and must in any case be
received by the Exchange Agent prior to the Expiration Date or the guaranteed
delivery procedure described below must be complied with.
The Notes and the Warrants will be accepted for exchange only in whole
Units of $1,000 principal amount of Notes and Warrants to purchase 60 shares of
Common Stock. If a holder of the Notes and Warrants depositing such securities
specifies a principal amount of Notes or number of Warrants to be exchanged
which is not an integral multiple of a Unit, such holder will be deemed to have
tendered the highest number of whole Units (i.e., $1,000 principal amount of
Notes and Warrants to purchase 60 shares of Common Stock) which is not greater
than the principal amount of Notes and number of Warrants tendered.
Holders of the Notes and Warrants exchanging their Notes and Warrants are
required under federal income tax law to provide the Exchange Agent with a
correct Taxpayer Identification Number on Substitute Form W-9 which is included,
together with instructions, in the Letter of Transmittal. Failure to complete
properly such information may result in the rejection of such holder's deposit
and tender. Should such requirement be waived by the Company, failure to
complete and return the Substitute Form W-9 to the Exchange Agent may subject
the holder to backup withholding on dividends on the Common Stock that might be
payable in the future.
The method of delivery of the Notes and Warrants and all other required
documents is at the election and risk of the holder but if sent by mail,
registered mail with return receipt requested, or overnight delivery service, in
each case properly insured, is recommended.
If a holder desires to tender his Notes and Warrants and such holder's
Notes and Warrants are not immediately available or time will not permit such
holder's Letter of Transmittal, Notes, Warrants and any other required documents
to reach the Exchange Agent before the Expiration Date of the Exchange Offer,
such holder's tender may be effected if:
(i) such tender is made through an Eligible Institution; and
(ii) prior to the Expiration Date, the Exchange Agent has received
from such Eligible Institution a duly executed Notice of Guaranteed
Delivery setting forth the name and address of the holder of such Notes and
Warrants and the principal amount of Notes and number of Warrants tendered
and stating that the tender is being made thereby and guaranteeing that,
within five Nasdaq trading days after the date of such Notice, the Letter
of Transmittal, together with the Notes and Warrants and any other
documents required by the Letter of Transmittal, will be deposited by such
Eligible Institution with the Exchange Agent; and
(iii) such Letter of Transmittal and Notes and Warrants, in proper
form for transfer, and other required documents are received by the
Exchange Agent within five Nasdaq trading days after the date of such
Notice.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission, telex or letter to the Exchange Agent and
must include a guaranty by an Eligible Institution in a form acceptable to the
Exchange Agent.
The acceptance by a holder of the Notes and Warrants of the Exchange Offer
pursuant to one of the procedures set forth above will constitute a binding
agreement between the holder and the Company in accordance with the terms and
subject to the conditions set forth herein and in the accompanying Letter of
Transmittal.
20
<PAGE> 22
All questions as to the form of all documents and the validity (including
time of receipt) and acceptance of all tenders will be determined by the
Company, in its sole discretion, which determination shall be final and binding.
The Company reserves the absolute right to reject any and all tenders not in
proper form or the acceptance of which would, in the opinion of the Company's
counsel, be unlawful. The Company also reserves the absolute right to waive any
of the conditions of the Exchange Offer or any defect or irregularity in the
deposit and tender of Notes and Warrants. The Company's interpretation of the
terms and conditions of the Exchange Offer (including the Letter of Transmittal
and the instructions thereto) will be final. No deposit and tender of the Notes
and Warrants will be deemed to have been properly made until all defects and
irregularities have been cured or waived. Neither the Company, the Exchange
Agent nor any other person shall be under any duty to give notification of any
defects or irregularities in tenders, and none of them shall incur any liability
for failure to give such annunciation.
WITHDRAWAL RIGHTS
Tenders of Units pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date, and unless theretofore accepted for exchange
as provided in the Exchange Offer, may also be withdrawn after 11:59 P.M., New
York City time, on September 3, 1996 (such date and time being the expiration of
40 business days from the commencement of the Exchange Offer). If the Company
extends the period of time during which the Exchange Offer is open, is delayed
in accepting for exchange Units or is unable to accept for exchange or exchange
Units for Common Stock pursuant to the Exchange Offer for any reason, then,
without prejudice to the Company's rights under the Exchange Offer, the Exchange
Agent may, on behalf of the Company, retain all Units tendered, and such Units
may not be withdrawn except as otherwise provided hereunder, subject to Rule
13e-4(f)(5) under the Exchange Act, which provides that the issuer making the
tender offer shall either pay the consideration offered, or return the tendered
securities, promptly after the termination or withdrawal of the tender offer.
To be effective, a written, telegraphic, telex or facsimile transmission
notice of withdrawal must be received by the Exchange Agent on a timely basis at
its address specified under "The Exchange Offer -- Exchange Agent." Any notice
of withdrawal must specify the name of the person having tendered the Units to
be withdrawn, the name(s) in which the Notes and Warrants are registered, if
different from that of the depositing and tendering holder, and the number of
Units to be withdrawn. If the Notes and the Warrants have been physically
delivered to the Exchange Agent, then prior to the release of such Notes and
Warrants, the tendering holder must get a written notice of withdrawal with the
signature on such notice of withdrawal guaranteed by an Eligible Institution.
All questions as to validity, form and eligibility (including time of receipt)
of notices of withdrawal will be determined by the Company, in its sole
discretion, which determination shall be final and binding. Withdrawals may not
be rescinded, and any Notes and Warrants effectively withdrawn will be deemed
not to have been duly deposited and tendered for purposes of the Exchange Offer.
However, withdrawn Units may be retendered by following one of the procedures
described in "The Exchange Offer -- Procedure for Exchange" at any time prior to
the Expiration Date.
None of the Company, the Exchange Agent, nor any other person will be under
any duty to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give such notification.
ACCEPTANCE OF UNITS FOR EXCHANGE
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Notes and Warrants validly deposited and tendered and
not withdrawn will be made promptly after the Expiration Date. For purposes of
the Exchange Offer, the Company shall be deemed to have accepted for exchange
validly tendered Notes and Warrants when, as and if the Company has given oral
or written notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering holders for the purposes of receiving Common Stock from
the Company and transmitting such securities to such holders. If the Company
should extend the Exchange Offer or be delayed in consummation of the Exchange
Offer for any reason, then, without prejudice to the Company's rights under the
Exchange Offer, the Exchange Agent acting on behalf of the Company may retain
tendered Notes and Warrants, and such Notes and Warrants may not be
21
<PAGE> 23
withdrawn, subject to the withdrawal rights of tendering holders set forth above
under "The Exchange Offer -- Withdrawal Rights." Tendered Notes and Warrants not
accepted for exchange by the Company because of an invalid tender, the
termination of the Exchange Offer or for any other reason, will be returned
without expense to the tendering holders as promptly as practicable following
the expiration or termination of the Exchange Offer.
Delivery of Common Stock in exchange for Notes and Warrants tendered
pursuant to the Exchange Offer will be made by the Company to the Exchange
Agent, as agent for the tendering holders, only after receipt by the Exchange
Agent of such Notes and Warrants, a properly completed and duly executed Letter
of Transmittal (or facsimile thereof) and any other required documents.
ACCRUED INTEREST
Interest is payable on the Notes quarterly on March 15, June 15, September
15 and December 15 of each year so long as they are outstanding. Interest
accrued from June 15, 1996 through the Expiration Date will be paid upon the
Notes accepted for exchange upon such acceptance. Interest on Notes accepted for
exchange will cease to accrue as of the Expiration Date.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange or exchange any Notes and Warrants
tendered, and may terminate or amend the Exchange Offer or may postpone (subject
to the requirements of the Exchange Act for prompt exchange or return of the
Notes and Warrants) the acceptance for exchange of, and exchange of, Notes and
Warrants tendered, if at any time on or after July 5, 1996 and prior to the
Expiration Date any of the following shall have occurred:
(i) less than 11,400 Units (60% of the Units outstanding) are properly
tendered and not withdrawn prior to the Expiration Date;
(ii) there shall have been threatened, instituted or pending any
action or proceeding by any government or governmental, regulatory or
administrative agency or authority or tribunal or any other person,
domestic or foreign, or before any court, authority, agency or tribunal
which (a) challenges the making of the Exchange Offer, the acquisition of
some or all of the Notes and Warrants pursuant to the Exchange Offer or
otherwise relates in any manner to the Exchange Offer; or (b) in the
Company's reasonable judgment, could materially affect the business,
condition (financial or other), income, operations or prospects of the
Company and its subsidiaries, taken as a whole, or otherwise materially
impair in any way the contemplated future conduct of the business of the
Company or any of its subsidiaries or materially impair the Exchange
Offer's contemplated benefits to the Company;
(iii) there shall have been any action threatened, pending or taken,
or approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to the Exchange Offer or the
Company or any of its subsidiaries, by any court or any authority, agency
or tribunal which, in the Company's reasonable judgment, would or might
directly or indirectly (a) make the acceptance for exchange or exchange
of some or all of the Notes and Warrants for shares of Common Stock
illegal or otherwise restrict or prohibit consummation of the Exchange
Offer; (b) delay or restrict the ability of the Company, or render the
Company unable, to accept for exchange or exchange some or all of the
Notes and Warrants for shares of Common Stock; (c) materially impair the
contemplated benefits of the Exchange Offer to the Company, or (d)
materially affect the business, condition (financial or other), income,
operations or prospects of the Company and its subsidiaries, taken as a
whole, or otherwise materially impair in any way the contemplated future
conduct of the business of the Company or any of its subsidiaries;
(iv) (a) any general suspension of trading in, or limitation on prices
for, securities on any national securities exchange or in the
over-the-counter market, (b) the declaration of a banking moratorium or
22
<PAGE> 24
any suspension of payments in respect of banks in the United States, (c)
the commencement of a war, armed hostilities or other international or
national calamity directly or indirectly involving the United States, (d)
any limitation (whether or not mandatory) by any governmental, regulatory
or administrative agency or authority on, or any event which, in the
Company's reasonable judgment, might affect, the extension of credit by
banks or other lending institutions in the United States, (e) any
significant change in the market price of the Common Stock, or any change
in the general political, market, economic or financial conditions in the
United States or abroad that could, in the reasonable judgment of the
Company, have a material adverse effect on the Company's business,
operations or prospects or the trading in the Common Stock or the Exchange
Offer's contemplated benefits to the Company or (f) in the case of any of
the foregoing existing at the time of the commencement of the Exchange
Offer, a material acceleration or worsening thereof;
(v) any tender or exchange offer with respect to some or all of the
Common Stock or the Notes or Warrants (other than the Exchange Offer), or a
merger, acquisition or other business combination proposal for the Company,
shall have been proposed, announced or made by any person or entity;
(vi) any change shall occur or be threatened in the business,
condition (financial or other), income, operations, Common Stock ownership,
or prospects of the Company and its subsidiaries, taken as a whole, which,
in the reasonable judgment of the Company, is or may be material to the
Company; or
(vii) (a) any person, entity or "group" (as that term is used in
Section 13(d)(3) of the Exchange Act) shall have acquired, or proposed to
acquire, beneficial ownership of shares of Common Stock entitled to more
than 5% of the aggregate votes entitled to be cast by all shares of Common
Stock then outstanding (other than a person, entity or group which had
publicly disclosed such ownership in a Schedule 13D or 13G (or an amendment
thereto) on file with the Commission prior to July 5, 1996) or (ii) any new
group shall have been formed which beneficially owns shares of Common Stock
entitled to more than 5% of the aggregate votes entitled to be cast by all
shares of Common Stock then outstanding;
and, in the reasonable opinion of the Company, in any such case and regardless
of the circumstances (including any action or omission to act by the Company)
giving rise to such condition, such event makes it inadvisable to proceed with
the Exchange Offer or with such acceptance for exchange or exchange.
The foregoing conditions are for the sole benefit of the Company and may
be asserted by the Company regardless of the circumstances (including any
action or inaction by the Company) giving rise to any such condition and any
such condition may be waived by the Company, in whole or in part, at any time
and from time to time in its reasonable discretion. The Company's failure at
any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right; the waiver of any such right with respect to particular
facts and circumstances shall not be deemed a waiver with respect to any other
facts or circumstances; and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time. Any determination by
the Company concerning the events described above will be final and binding on
all parties.
EXTENSION OF EXCHANGE OFFER PERIOD; TERMINATION; AMENDMENTS
The Company expressly reserves the right, in its reasonable discretion, at
any time or from time to time, to extend the period of time during which the
Exchange Offer is open by giving oral or written notice of such extension to
the Exchange Agent. During any such extension, all Notes and Warrants
previously tendered and not exchanged or withdrawn will remain subject to the
Exchange Offer, except to the extent that such Notes and Warrants may be
withdrawn as set forth in "The Exchange Offer -- Withdrawal Rights." The
Company also expressly reserves the right, in its reasonable discretion, to
terminate the Exchange Offer and not accept for exchange or exchange any Notes
and Warrants prior to the Expiration Date or, subject to applicable law, to
postpone the exchange of Notes and Warrants for Common Stock upon the
occurrence of any of the conditions specified in "The Exchange Offer --
Conditions of the Exchange Offer" hereof by giving oral or written notice of
such termination or postponement to the Exchange Agent and making a public
announcement thereof. The Company's reservation of the right to delay exchange
of Notes and Warrants which it has accepted for payment is limited by Rule
13e-4(f)(5) promulgated under the Exchange Act, which requires that the Company
must pay the consideration offered or return the Notes and Warrants
23
<PAGE> 25
tendered promptly after termination or withdrawal of a tender offer. Subject to
compliance with applicable law, the Company further reserves the right, in its
reasonable discretion, to amend the Exchange Offer in any respect. Amendments
to the Exchange Offer may be made at any time or from time to time effected by
public announcement thereof, such announcement, in the case of any extension,
to be issued no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date. Any public announcement
made pursuant to the Exchange Offer will be disseminated promptly to holders in
a manner reasonably designed to inform holders of such change. Without limiting
the manner in which the Company may choose to make a public announcement,
except as required by applicable law, the Company shall have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to the Dow Jones News Service.
If the Company materially changes the terms of the Exchange Offer or the
information concerning the Exchange Offer, the Company will extend the Exchange
Offer to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(2) promulgated
under the Exchange Act. These rules provide that the minimum period during which
an offer must remain open following material changes in the terms of the offer
or information concerning the offer (other than a change in consideration
offered or a change in percentage of securities sought) will depend on the facts
and circumstances, including the relative materiality of such terms or
information. The Commission has stated that as a general rule, it is of the view
that an offer should remain open for a minimum of five business days from the
date that notice of such a material change is first published, sent or given. If
(i) the Company increases or decreases the consideration offered for the Units
pursuant to the Exchange Offer and (ii) the Exchange Offer is scheduled to
expire at any time earlier than the expiration of a period ending on the tenth
business day from, and including, the date that notice of such increase or
decrease is first published, sent or given, the Exchange Offer will be extended
until the expiration of such period of ten business days.
SOLICITATION OF TENDERS; FEES
The Company is making the Exchange Offer in reliance on the exemption from
the registration requirements of the Securities Act, afforded by Section 3(a)(9)
thereof. The Company, therefore, has not retained, and will not pay any
commission or other remuneration to, any broker, dealer, salesman or other
person for soliciting tenders of the Notes and Warrants. However, regular
employees of the Company (who will not be additionally compensated therefor) may
solicit tenders and will answer inquiries concerning the Exchange Offer.
The Company has retained Alex. Brown & Sons Incorporated ("Alex. Brown"),
an investment banking firm, to advise the Company as to certain terms of the
Exchange Offer. Alex. Brown has not been retained to render and has not
rendered, an opinion as to the fairness of the Exchange Offer to the holders of
the Company's various securities or to solicit exchanges. Alex. Brown will
receive a customary fee for such services. Such fee is payable regardless of
whether the Company proceeds with the Exchange Offer or, if it does, the number
of Units exchanged. In addition, the Company has agreed to indemnify Alex. Brown
against certain liabilities and expenses, including liabilities under the
federal securities laws.
24
<PAGE> 26
EXCHANGE AGENT
American Stock Transfer & Trust Company has been appointed as Exchange
Agent for the Exchange Offer. The Company will pay the Exchange Agent reasonable
and customary compensation for its services in connection with the Exchange
Offer, will reimburse the Exchange Agent for its reasonable out-of-pocket
expenses, and will indemnify the Exchange Agent against certain liabilities and
expenses in connection therewith, including liabilities under the federal
securities laws. All correspondence in connection with the Exchange Offer and
the Letter of Transmittal should be addressed to the Exchange Agent as follows:
AMERICAN STOCK TRANSFER & TRUST COMPANY
BY MAIL, OVERNIGHT COURIER OR HAND DELIVERY TO:
AMERICAN STOCK TRANSFER & TRUST COMPANY
40 WALL STREET
NEW YORK, NY 10005
BY FACSIMILE TRANSMISSION (FOR ELIGIBLE INSTITUTIONS ONLY):
718-234-5001
TO CONFIRM FACSIMILE TRANSMISSION CALL:
718-921-8237
CONSENT TO WAIVER OF ANTI-DILUTION PROVISIONS OF NOTES
WITH RESPECT TO EXCHANGE OFFER
The Notes contain anti-dilution provisions that adjust the Conversion Price
at which the Notes are converted into shares of Common Stock and, therefore, the
number of shares of Common Stock issuable upon conversion of the Notes.
Depending on the price of a share of Common Stock on the Expiration Date,
issuance of Common Stock pursuant to the Exchange Offer could cause an
adjustment to the Conversion Price and the number of shares issuable upon
subsequent conversion of any Notes that are not tendered for exchange.
Accordingly, as part of the Exchange Offer, each person who tenders Notes to be
exchanged, by signing the Letter of Transmittal, shall consent to waive any
anti-dilution adjustments with respect to the Conversion Price or the number of
shares of Common Stock issuable upon conversion of the Notes as a result of the
Exchange Offer. To be effective, such a consent must be signed by holders of at
least 51% of the aggregate principal amount of the Notes outstanding.
Accordingly, in the event the Exchange Offer proceeds, holders of more than such
amount of Notes will have consented and, consequently, there will be no
adjustment to the Conversion Price of the Notes or the number of shares of
Common Stock issuable upon conversion of the Notes as a result of the Exchange
Offer. Except as set forth above, the anti-dilution provisions of any Notes
remaining outstanding after the Exchange Offer shall not be affected.
TRANSFERABILITY OF COMMON STOCK
The issuance of shares of Common Stock upon exchange of the Units is exempt
from the registration requirements of the Securities Act, by reason of Section
3(a)(9) thereof. Pursuant to a Registration Statement on Form S-3, the Company
has registered the shares of Common Stock underlying the Notes and Warrants.
Accordingly, upon consummation of the Exchange Offer, the shares issued in the
Exchange Offer will be registered for resale by the holders thereof pursuant to
such Registration Statement. Persons who receive Common Stock in the Exchange
Offer will be required to deliver a copy of the Prospectus forming part of such
Registration Statement in accordance with the rules and regulations of the
Commission to each purchaser of such shares. Copies of the Prospectus can be
obtained from the Company by contacting the Secretary, SubMicron Systems
Corporation, 6620 Grant Way, Allentown, PA 18106, telephone 610-391-9200.
25
<PAGE> 27
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
Barry W. Ridings, a member of the Company's Board of Directors and a
managing director of Alex. Brown, holds $100,000 principal amount of Notes and
6,000 Warrants. Mr. Ridings is eligible to participate in the Exchange Offer
upon the same terms and subject to the same conditions as any other holder of
Notes and Warrants.
TRANSACTIONS AND AGREEMENTS CONCERNING THE COMMON STOCK
During the 40 business days preceding the date hereof, David F. Levy and
James S. Molinaro, directors and/or executive officers of the Company, each sold
shares of Common Stock in the open market on the dates, in the amounts and at
the price per share as set forth below:
<TABLE>
<CAPTION>
PRICE
DATE SHARES PER SHARE
- -------- ------- ---------
<S> <C> <C>
5/13/96 12,500 $9 1/8
5/14/96 12,500 9 1/4
5/14/96 5,000 9 1/8
5/15/96 20,000 9 1/8
5/16/96 12,500 9 3/8
5/17/96 7,500 9 3/8
5/20/96 30,000 9 3/8
</TABLE>
Except as set forth above, during the forty business days preceding the
date hereof, neither the Company nor, to its knowledge, any of its subsidiaries,
executive officers or directors or any associate of such officer or director has
engaged in any transaction involving the Common Stock or the Notes or Warrants.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The exchange of Notes and Warrants for shares of Common Stock will be a
taxable event for federal income tax purposes. A holder will recognize taxable
gain (or loss) equal to the amount by which the fair market value of the Common
Stock received for the Notes and Warrants, respectively, exceeds (or is less
than) the holder's adjusted tax basis in the Notes and Warrants. The fair market
value of the Common Stock received will depend on the price of the Common Stock
on the Expiration Date, and, accordingly is not presently determinable. A
holder's basis in the Notes and Warrants, if held from the date of original
issuance, is the original purchase price (i.e., $1,000 per Unit) plus the amount
of the original issue discount on the Notes which was includible in income by
such holder through the Expiration Date. The taxable gain (or loss) will be
characterized as a short-term capital gain (or loss) if the Notes and the
Warrants are capital assets in the hands of a holder. In addition to the amount
of the original issue discount recognized in 1995, a holder will also recognize
taxable income attributable to the portion of the original issue discount on the
Notes which accrued from January 1, 1996 to the Expiration Date under applicable
Internal Revenue Code rules governing the current inclusion in income of
original issue discount. The accrued interest to be paid to a holder upon the
exchange will also be recognized as taxable interest income.
Holders should consult their tax advisors concerning the specific tax
consequences to them of the Exchange Offer, including state and local tax
consequences.
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DESCRIPTION OF NOTES
GENERAL
The Notes are designated as 9% Convertible Subordinated Notes due December
15, 1997. The description of the Notes provided in this Offering Circular is of
a summary nature, does not purport to be complete and is qualified in its
entirety by reference to the Notes.
PRINCIPAL AND INTEREST
Interest on the Notes accrues from the date of issuance and is payable
quarterly on March 15, June 15, September 15 and December 15 of each year at a
rate of 9% per annum, commencing March 15, 1996, until payment of principal has
been made or duly provided for, to the persons who are registered holders of
Notes at the close of business on the March 1, June 1, September 1 and December
1 next preceding the interest payment date. Interest will be computed on the
basis of a 360-day year of twelve 30-day months. The Company may pay principal
and interest by check and may mail an interest check to a holder's registered
address. Payment of the full amount of principal will be due and payable on
December 15, 1997, unless the Notes are redeemed or converted earlier in
accordance with the provisions of the Notes. Holders must surrender their Notes
to the payment agent to collect principal payments.
SUBORDINATION
To the extent provided in the Notes, the indebtedness, including interest,
evidenced by the Notes, is subordinate and subject in right of payment to the
prior payment when due in full of all Senior Indebtedness. Senior Indebtedness
is defined to include the principal of and premium, if any, bank fees, charges
and expenses and interest on (i) indebtedness (other than the Notes), whether or
not secured and whether heretofore or hereafter created, occurred or assumed,
(a) for borrowed money or (b) in connection with the acquisition by the Company
or a subsidiary of any business, properties or assets or (ii) any refundings,
renewals, extensions, replacements or deferrals of any such indebtedness, in the
case of (i) and (ii) above for the payment of which the Company or a subsidiary
of the Company is liable directly or indirectly by guarantee or otherwise,
unless the terms of the instrument evidencing such indebtedness specifically
provides that such indebtedness is not superior in right of payment to the
Notes. The Notes do not restrict the Company from incurring additional Senior
Indebtedness and most other indebtedness. However, the Company may not sell
unsecured notes unless they are junior in right of payment to the Notes.
CONVERSION RIGHTS
The Notes may be converted by the holders at their principal amount into
Common Stock of the Company at any time prior to maturity or redemption, at a
conversion price initially equal to $11.75 per share of Common Stock (the
"Conversion Price"), subject to adjustment upon the occurrence of certain
events, except that the right to convert Notes which are called for redemption
terminates on the date fixed for redemption. The Conversion Price is subject to
adjustment upon the occurrence of any of the following events: (i) the
subdivision, combination, reclassification or capital reorganization of the
Common Stock; (ii) the payment of dividends or other distributions on the Common
Stock in shares of Common Stock; or (iii) the issuance of shares of Common Stock
and Common Stock equivalents after December 13, 1995 at a price lower than the
Conversion Price (other than with respect to options or warrants or pursuant to
grants under the Company's stock plans outstanding or existing as of December
13, 1995, respectively). No adjustment of the Conversion Price is required to be
made until cumulative adjustments otherwise required to be made amount to 1% or
more of the Conversion Price last adjusted. As a result of the acquisition of
Imtec described under "Summary of Offering Circular -- Recent Developments," the
Conversion Price for the Notes is currently $11.64. Fractional shares of Common
Stock will not be issued upon conversion, but cash adjustment will be paid in
lieu thereof, based upon the closing sale price on the last business day prior
to the date of conversion. Interest will accrue on Notes through the day
immediately preceding the date of conversion and will be paid to a holder when
his shares of Common Stock are delivered, except that if the conversion occurs
between the record date with respect to any interest payment and the next
succeeding interest payment date,
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the Noteholder shall receive the full quarterly interest payment, which shall be
adjusted as described below. If a Note is surrendered for conversion during the
period from the close of business on any record date for the payment of interest
on the Notes to the opening of business on the interest payment date (except in
the case of Notes or portions thereof which have been called for redemption on a
redemption date within such period), it must be accompanied by payment by check
or other method acceptable to the Company of an amount equal to interest payable
from the date of conversion to the interest payment date; provided, however,
that no such payment need be made if there shall exist at the time of conversion
a default in the payment of interest on the Notes. No payment or adjustment
shall be made for dividends on securities issued upon conversion. In the case of
Notes called for redemption, conversion rights will expire on the close of
business on the redemption date.
REDEMPTION
The Notes may be redeemed, at the option of the Company, in whole or in
part, at any time, on at least 30 days' notice to the Noteholders at their last
registered addresses, at a redemption price equal to 100% of the principal
amount, together with accrued interest to the date fixed for redemption,
provided (i) the closing bid price for the Common Stock has been at least 150%
of the Conversion Price for a period of at least thirty consecutive trading days
ending within five days of the giving of the notice of redemption and (ii) the
shares of Common Stock issuable upon conversion of the Notes have been
registered under the Securities Act.
SINKING FUND
No sinking fund is required by the terms of the Notes.
EVENTS OF DEFAULT
Events of Default are defined in the Notes as being in addition to certain
bankruptcy and covenant defaults: (i) default in payment of any interest
installment or payment of principal under the Notes; (ii) payment default on the
Company's principal line of credit (after the expiration of any applicable grace
periods); (iii) if a registration statement covering the shares (the
"Registration Shares") issuable upon conversion of the Notes and exercise of the
Warrants is not declared effective by the Commission by June 30, 1996 (such a
Registration Statement has been declared effective), or thereafter not
maintained effective (subject to certain blackout periods) until such stock is
saleable under Rule 144(k) of the Securities Act or a successor provision (a
"Registration Default"); and (iv) if the Company has earnings per share less
than $.20 for fiscal years 1995 or 1996. Events of Default do not occur until
the end of a five-day grace period during which such conditions may be
satisfied, in which event no Event of Default shall be deemed to have occurred.
The Notes provide that, if an Event of Default specified therein (other
than an Event of Default in (iv) above with respect to the Company's earnings
per share, for which no adjustment in interest rate shall apply) will have
occurred and be continuing, the interest rate payable on the Notes shall
increase to 16% during the continuance of such Event of Default. In addition,
upon the first occurrence of an Event of Default specified in (i)-(iv) above,
the Conversion Price will be adjusted to equal 80% of the average of the closing
bid price (the "Reference Price") of the Common Stock during the ten trading
days beginning five trading days before the occurrence of such Event of Default
(if at the time of such Event of Default the Registration Shares are registered
or can be publicly sold pursuant to Rule 144 under the Securities Act) or, if
not so registered or publicly saleable, during the ten trading days beginning
five trading days before the date the Registration Shares first become
registered or can be publicly sold pursuant to Rule 144 under the Securities
Act. In either case, the Conversion Price will only be adjusted if the Reference
Price is lower than the then current Conversion Price (the lower of the then
current Conversion Price and the Reference Price being the "Adjustment Price").
The Conversion Price is subject to further downward adjustment in an amount
equal to 2% of the Adjustment Price for each 30-day period during which a
Registration Default continues. Except with respect to an Event of Default on
the payment of principal of the Notes, the Conversion Price will not be lower
than $4.50 per share as a result of an Event of Default. Adjustment in the
Conversion Price as a result of an Event of Default shall only occur one time.
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MODIFICATION OF THE NOTES
The Notes contain provisions permitting the Company, with the consent of
the holders of a majority in principal amount of the outstanding Notes, to amend
the Notes adding any provisions to or changing, eliminating or waiving any of
the provisions of the Notes or modifying the rights of the holders of Notes,
except that no such amendment may (i) extend the fixed maturity of any Note, or
reduce the principal amount thereof, or reduce the rate or extend the time for
payment of interest thereon, without the consent of the holder of each Note so
affected; (ii) modify the provisions of the Notes with respect to the
subordination of the Notes in a manner adverse to the holders or alter the
provisions in respect of the right to convert the Notes, without the consent of
the holders of all of the outstanding Notes; or (iii) reduce the aforesaid
percentage of Notes, the consent of the holders of which is required for any
amendment, without the consent of the holders of all of the outstanding Notes.
DESCRIPTION OF WARRANTS
Each Warrant may be exercised from time to time, in whole or in part, until
5:00 p.m, New York City time, on December 12, 2000 (the "Warrant Expiration
Date"). Each Warrant entitles its holder to purchase one share of Common Stock
at $14.00 per share at any time or from time to time until the Warrant
Expiration Date. The number of shares purchased and the exercise price are
subject to adjustments in the event of a subdivision, combination,
reclassification or capital reorganization of the Common Stock.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized to issue 100,000,000 shares of Common Stock, par
value $.0001 per share, and 5,000 shares of Preferred Stock, par value $.01 per
share. As of June 15, 1996, 16,724,994 shares of Common Stock were outstanding.
No shares of Preferred Stock are currently outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50% of the shares voted for the election of directors can
elect all of the directors. The holders of Common Stock are entitled to receive
dividends when, as and if declared by the Board of Directors out of funds
legally available therefor. In the event of liquidation, dissolution or winding
up of the Company, the holders of Common Stock are entitled to share ratably in
all assets remaining available for distribution to them after payment of
liabilities and after provision has been made for each class of stock, if any,
having preference over the Common Stock. Holders of shares of Common Stock, as
such, have no conversion, preemptive or other subscription rights, and there are
no redemption provisions applicable to the Common Stock. All of the outstanding
shares of Common Stock are fully paid and nonassessable.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of 5,000
shares of a "blank check" preferred stock (the "Preferred Stock") with such
designations, rights and preferences as may be determined from time to time by
the Company's Board. Accordingly, the Board is empowered, without stockholder
approval, to issue Preferred Stock with dividend, liquidation, conversion,
voting or other rights which could adversely affect the voting power or other
rights of the holders of Common Stock. The Preferred Stock could be utilized,
under certain circumstances, as a method of discouraging, delaying or preventing
a change in control of the Company.
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EXHIBIT (a)(6)
SUBMICRON SYSTEMS CORPORATION EXTENDS OFFERING
TO EXCHANGE SHARES OF ITS COMMON STOCK
FOR PRIVATELY PLACED NOTES AND WARRANTS
Allentown, PA, August 5, 1996 -- SubMicron Systems Corporation
(Nasdaq "SUBM") announced today that it has extended its offer to exchange 135
shares of its Common Stock for each Unit consisting of $1,000 principal amount
of its 9% Convertible Subordinated Notes due 1997 and Warrants to purchase 60
shares of its Common Stock at $14 per share. All other terms and conditions of
the Exchange Offer remain unaffected.
<PAGE> 1
EXHIBIT (a)(7)
[SUBMICRON SYSTEMS CORPORATION LETTERHEAD]
August 5, 1996
To: Holders of 9% Convertible Subordinated Notes due 1997 and
Warrants to Purchase Shares of SubMicron Systems Corporation
Common Stock
Ladies and Gentlemen:
You have previously been notified pursuant to the terms of an
Offering Circular dated July 8, 1996 and related Letter of Transmittal that
SubMicron Systems Corporation (the "Company") is offering you the opportunity to
exchange 135 shares of the Company's Common Stock for each Unit you hold of
$1,000 principal amount of the Company's 9% Convertible Subordinated Notes due
1997 and Warrants to purchase 60 shares of the Company's Common Stock. Please be
advised that the Company has extended the expiration date of the Exchange Offer
until 5:00 p.m., New York City time, on August 26, 1996. The Exchange Offer will
expire at such time, unless extended, and remains subject to the same terms and
conditions as set forth in the Offering Circular and Letter of Transmittal.
Very truly yours,
David F. Levy
President and
Chief Executive Officer
